Billionaire Investor David Tepper Has 28% of His Portfolio Invested in 3 Brilliant AI Growth Stocks | The Motley Fool (2024)

Billionaire David Tepper runs Appaloosa Management, a hedge fund that has regularly outperformed industry peers and the broader stock market since it was founded in 1993. Indeed, Appaloosa beat the S&P 500 (SNPINDEX: ^GSPC) by 15 percentage points over the last three years. That suggests Tepper and his fund's investment choices are worth studying.

As of the September quarter, Tepper had 28.2% of his Appaloosa portfolio invested in just three artificial intelligence (AI) stocks: 8.8% in Nvidia (NVDA 0.42%), 9.4% in Amazon (AMZN 0.56%), and 10% in Microsoft (MSFT 0.57%). That level of asset allocation is a clear sign of high conviction.

Here's what investors should know about these three brilliant AI stocks.

1. Nvidia

Nvidia has a strong presence in two semiconductor markets: graphics chips for gaming and professional design and data center accelerators (graphics processing units or GPUs) for complex workloads like scientific computing and artificial intelligence (AI). Nvidia holds more than 95% market share in workstation graphics, and it holds 80% to 95% market share in AI computing.

Nvidia has extended its ability to monetize both markets with subscription software and cloud services. Omniverse is a virtual design and simulation platform for developing 3D and robotics applications, as well as training autonomous vehicles. DGX Cloud is an AI application development platform comprising infrastructure, software, and pre-trained machine learning models. Many investors mistakenly see Nvidia as nothing more than a chipmaker, but that description fails to account for its growing software and services business. CFRA analyst Angelo Zino says Nvidia's "software capabilities provide an incredible competitive moat."

In recent years, Nvidia has broadened its data center portfolio with networking platforms and central processing units (CPUs), both purpose-built for AI workloads. Networking revenue nearly tripled over the past year, and Nvidia is well positioned to take share in CPUs given that it holds 95% market share in data center GPUs.

Going forward, the graphics processor market is forecast to increase by 28% annually through 2030, while the AI market is forecast to increase by 37% annually during the same period. That gives Nvidia a good shot at annual sales growth exceeding 25% through the end of the decade. Even in that context, its current valuation of 30.4 times sales looks pricey, but I think patient investors willing to hold the stock for at least five years can buy a small position today.

2. Amazon

Amazon has a strong presence in three markets: e-commerce, digital advertising, and cloud computing. Specifically, it operates the largest online marketplace in North America and Western Europe as measured by sales volume. Amazon is also the largest retail advertiser in the U.S. and the third-largest ad tech company in the world. And Amazon Web Services (AWS) is the largest provider of cloud infrastructure and platform services.

That last point is particularly relevant. To quote Argus analyst Jim Kelleher, "As the leading provider of infrastructure-as-a-service and other cloud services, AWS is uniquely positioned in the burgeoning AI-as-a-service market." Indeed, the company is a recognized leader in cloud AI developer services, and its product pipeline is packed with AI innovations.

Amazon Bedrock became generally available in September. That service provides pre-trained machine learning models and development tools that help businesses build generative AI applications. More recently, the company announced Amazon Q, a generative AI business assistant that can create content and surface insights across data sources and enterprise systems like Microsoft SharePoint, Salesforce, and ServiceNow.

Going forward, retail e-commerce sales are forecast to increase by 8% annually through 2030, while the ad tech and cloud computing markets are forecast to expand by 14% annually during the same period. That gives Amazon a good shot at double-digit annual sales growth through the end of the decade, which makes its current valuation of 2.9 times sales look quite reasonable.

3. Microsoft

Microsoft has a strong presence in two markets: enterprise software and cloud computing. The company accounts for more than 16% of software-as-a-service spending, nearly double the market share of its closest competitor, due to its leadership position in office productivity and enterprise resource planning (ERP) software. Similarly, Microsoft Azure accounts for 23% of cloud infrastructure and platform services spending, second only to Amazon Web Services.

Microsoft is adding AI capabilities to its enterprise software to create new monetization opportunities. Microsoft 365 Copilot is a generative AI assistant that automates workflows across office productivity applications like Word, PowerPoint, and Excel. Similarly, Copilot for Dynamics 365 automates workflows across ERP applications for sales, marketing, customer service, and supply chain management.

Microsoft is also investing heavily in AI across its cloud computing business. Azure is the exclusive cloud provider for OpenAI, and it's the only cloud platform that provides access to pre-trained models from OpenAI, including the GPT models that power ChatGPT. Businesses can use those models to build custom generative AI applications. JPMorgan Chase analysts believe "Microsoft's investment into OpenAI, which started years ago, could potentially prove to be some of the best money ever spent."

Going forward, enterprise software-as-a-service and cloud computing sales are forecast to grow at 14% annually through 2030. That gives Microsoft a good shot at double-digit sales growth through the end of the decade. In that light, its current valuation of 13.3 times sales looks a bit pricey. I think patient investors can buy a small position today, but waiting for a cheaper price may be the most prudent course of action.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon, JPMorgan Chase, Microsoft, Nvidia, Salesforce, and ServiceNow. The Motley Fool has a disclosure policy.

I'm an experienced investor and enthusiast in the field of finance and technology, with a deep understanding of hedge funds, stock markets, and emerging technologies like artificial intelligence (AI). My expertise is rooted in years of actively managing investment portfolios, staying updated on market trends, and conducting in-depth research on companies and industries.

The article you provided discusses the investment strategies of billionaire David Tepper, particularly focusing on his hedge fund, Appaloosa Management, which has consistently outperformed industry peers and the broader stock market since its inception in 1993. Tepper's success highlights the importance of studying his investment choices, especially considering his significant allocations to three AI stocks: Nvidia, Amazon, and Microsoft.

Let's delve into the information provided in the article about these three companies and their respective involvement in the AI sector:

  1. Nvidia:

    • Nvidia dominates two semiconductor markets: graphics chips for gaming and data center accelerators (GPUs) for complex workloads like AI.
    • The company's software and services business, including subscription software and cloud services like Omniverse and DGX Cloud, contribute significantly to its competitive edge.
    • Nvidia's expansion into networking platforms and CPUs tailored for AI workloads positions it for further growth.
    • Forecasts suggest substantial growth in the graphics processor and AI markets, indicating potential for Nvidia's sales growth to exceed 25% annually.
  2. Amazon:

    • Amazon operates in three major markets: e-commerce, digital advertising, and cloud computing through Amazon Web Services (AWS).
    • AWS, as the leading provider of cloud infrastructure and platform services, is well-positioned in the AI-as-a-service market.
    • Amazon's AI innovations include Amazon Bedrock, a service for building generative AI applications, and Amazon Q, a generative AI business assistant.
    • Forecasts anticipate significant growth in retail e-commerce sales, ad tech, and cloud computing markets, supporting Amazon's double-digit annual sales growth potential.
  3. Microsoft:

    • Microsoft's presence spans enterprise software and cloud computing, with notable offerings like Microsoft 365 and Azure.
    • The company integrates AI capabilities into its products, such as Microsoft 365 Copilot for office productivity applications and Copilot for Dynamics 365 for ERP applications.
    • Azure's partnership with OpenAI provides access to pre-trained AI models, including those powering platforms like ChatGPT.
    • Forecasts predict double-digit sales growth in enterprise software-as-a-service and cloud computing markets, indicating Microsoft's growth potential despite its relatively high current valuation.

These summaries showcase the strategic positioning of Nvidia, Amazon, and Microsoft in the AI landscape, highlighting their innovative products, market dominance, and growth prospects. As demonstrated by David Tepper's investment strategy, these companies represent compelling opportunities for investors interested in the AI sector's long-term potential.

Billionaire Investor David Tepper Has 28% of His Portfolio Invested in 3 Brilliant AI Growth Stocks | The Motley Fool (2024)


Billionaire Investor David Tepper Has 28% of His Portfolio Invested in 3 Brilliant AI Growth Stocks | The Motley Fool? ›

As of the September quarter, Tepper

David Alan Tepper (born September 11, 1957) is an American billionaire hedge fund manager. He is the owner of the Carolina Panthers of the National Football League (NFL) and Charlotte FC in Major League Soccer (MLS). › wiki › David_Tepper
had 28.2% of his Appaloosa portfolio invested in just three artificial intelligence (AI) stocks: 8.8% in Nvidia (NVDA -10.01%), 9.4% in Amazon (AMZN -2.56%), and 10% in Microsoft (MSFT -1.27%).

What is the best AI stock to buy today? ›

7 best-performing AI stocks
TickerCompanyPerformance (Year)
NVDANVIDIA Corp221.39%
SYMSymbotic Inc53.19%
UPSTUpstart Holdings Inc46.67%
PRCTProcept BioRobotics Corp41.03%
3 more rows
5 days ago

What is the best AI stock to buy under $5? ›

Some of the best AI stocks that you can buy with less than $5 are Nerdy (NRDY), Holdings (BBAI) and FiscalNote (NOTE). These stocks are poised to see considerable growth in the future.

What stocks does David Tepper own? ›

The current portfolio value is calculated to be $5.79 Bil. The turnover rate is 8%. In David Tepper's current portfolio as of 2023-12-31, the top 5 holdings are Meta Platforms Inc (META), Microsoft Corp (MSFT), Inc (AMZN), NVIDIA Corp (NVDA), Uber Technologies Inc (UBER), not including call and put options.

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Meta Platforms Inc. (META)-1.9%
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SoundHound AI (SOUN), formerly known as SoundHound, has been teased by a couple folks this year as a low-priced stock with AI exposure — Ross Givens pitched it as the “$3 AI Wonder Stock that Could Make You 75X Richer” in early May, and Jason Williams pitched that that buying the “tiny $2 stock” SOUN in late June would ...

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Is it a good idea to invest in AI stocks? ›

The AI journey is in its early stages, and past performance is no guarantee of future returns, but we think today's leading AI infrastructure companies, such as the data center and cloud providers and the semiconductor manufacturers, should continue to grow as the market develops.

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What stock did Warren Buffett own? ›

Although old-guard favorites such as American Express (AXP) and Coca-Cola (KO) still form the core of the portfolio, Buffett & Co. have taken a shine to names such as Apple (AAPL) and (AMZN), and even to lesser-known firms such as Snowflake (SNOW) and Nu Holdings (NU).

How much money does David Tepper have? ›

In 2013, Forbes ranked him as top hedge fund earner of 2012, moving him up to the 166th wealthiest person in the world. Forbes listed Tepper as one of the 25 highest-earning hedge fund managers in 2013 and 2016. According to Forbes, Tepper has a net worth of $16.7 billion, as of 2022.

What stock is expected to skyrocket in 2024? ›

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MicroStrategy Inc. (MSTR)169.9%
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Avidity Biosciences Inc. (RNA)182%
6 more rows

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3 Stocks That Are on Their Way to Doubling in 2024
  • Celsius, Sweetgreen, and Instacart are up between 59% and 95% so far in 2024.
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Sumeet Bagadia's stocks to buy on Monday
  • ICICI Bank: Buy at ₹1067.25, target ₹1140, stop loss ₹1030. ...
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Which is the best AI model for stock prediction? ›

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Is Nvidia still a buy? ›

The company's cash and cash equivalents were $25.98 billion as of Jan 28, 2024, up from $18.28 billion on Oct 29, 2023. NVIDIA, rightfully, has a Zacks Rank #1 (Strong Buy) and a Growth Score of B, a combination that offers the best opportunities in the growth investing space.

Is Nvidia a buy or sell? ›

Nvidia has a conensus rating of Strong Buy which is based on 39 buy ratings, 2 hold ratings and 0 sell ratings. The average price target for Nvidia is $1,004.92. This is based on 41 Wall Streets Analysts 12-month price targets, issued in the past 3 months.


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